GXY (ASX) Ann: Quarterly Activities Report

Originally posted by Thesi ↑

My comment above is backed by the announcement.

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With a forecasted production rate of 90,000 to 105,000 tonnes.

By not going downstream and producing lithium chemicals again the company is at the mercy of the converters and customers that have stopped purchasing Mt Cattlin production.

Sal De Vida has been crippled to a test tube that the company will continue to plunge money into in the knowledge that it will not produce any revenue for the company once it is complete.

The company is no longer talking about Q2-Q3 for a final investment decision at Sal De Vida, this has been pushed back to "early" in the second half of the year.

It's a depressing and bleak outlook that the company is presenting.

A surplus of production and rising inventory stockpiles of lithium raw materials were key supply side challenges in 2019 and a key driver of the decline in lithium prices. The challenge posed by excess stockpiles is expected to persist throughout the early part of 2020.

Though there was a glimmer of hope...

Investment in upstream projects was stifled in H2 2019, with the current pricing environment insufficient to incentivise further expenditure. In contrast, the level of downstream investment in lithium-ion battery manufacturing and OEM production lines continued to accelerate. This mismatch in upstream investment should accelerate the reversal of the market back to deficit given the lead times associated with upstream project construction and ramp-up are likely to mean incremental supply will be insufficient to meet demand growth in the medium term.

Where that doesn't advantage Galaxy is that Sal De Vida will still be a test tube project and a part of the delayed construction and ramp up.

But, the company could play this well and receive investment to cover the cost to build entirely which was hoped for in the previous discussions that produced no results.

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@Thesi

You made an important point here and in your next post.

GXY has missed a good 20 months of opportunity to fast track SDV and unshackle itself from the mercy of spod converters.

Timing the market is tricky, but moving SDV forward earlier would actually have de-risked GXY business (annual Report 2019 gives you some insight).

Judging by past behaviour of certain GXY BOD members, sitting on the asset and waiting for a T/O and hefty bonus could be their real agenda and explain a few things.

Having Simon as CEO with some real on the ground experience from his days at ILU will hopefully see some changes and SDV finally get built.